The Mortgage Market Review - what to expect

amnblog

We are now less than 24 hours from the Mortgage Market Review coming into effect. We have seen a number of threads here recently discussing various issues for borrowers as a result of the review.

Anyone considering obtaining a mortgage this year or in the future would probably benefit from understanding a little more about what toexpect.


The press will be awash with article over the weekend so I thought you would rather hear direct from brokers who deal with lenders every day rather than journalists with third hand information, political agendas, and papers to sell.


Affordability

Expect to see considerably more focus on overall affordability. Expect the lender to ask you questions about all of your outgoings, including items like childcare, hairdressing and dentistry, gym membership, TV subscriptions and other social costs.

It is the lenders responsibility under the law to ensure that any new residential mortgage is affordable to you. You can therefore expect them to review your recent bank statements to get a fix on your outgoings.

Further to this, lenders have to apply a ‘stress test’ so that they can confirm that if mortgage rates rise in the manner expected by the market you will still be able to afford your mortgage. Some borrowers may fall down on this stress test.

Any borrowers who believe any affordability calculation made by a lender is too pessimistic or not fair will find their complaints falling on deaf ears.

Certainly the ‘the mortgage will be less than my rent’ argument will not wash.

Interest only

Lenders are been pulling out the interest only market over the last two years and only borrowers with a credible repayment strategy can expect to obtain interest only lending on any part of their residential mortgage.

Advice

Regulated mortgage sales must be advised from midnight tonight.

Whereas in the past high Street banks have slapped a ‘mortgage adviser’ badge on a member of staff and left them to provide an information only service that many clients thought was ‘mortgage advice’ - this has now been outlawed.

Whether you get advice direct in the bank or via a mortgage broker, the individual advising you must be qualified to do so.

In practice this means the borrowers applying direct to the Bank can expect meetings, be they face-to-face, or over the telephone, to take much longer than previously.

You should also bear in mind that if you go through this advice process directly with a Bank and then for some reason do not meet their underwriting criteria. You have wasted both their time and your own.

An independent mortgage broker is charged with understanding lenders criteria so that they can recommend a prospective borrower to the correct lender and the correct product.

Avoiding direct to lender applications and using an independent mortgage broker will save you time, frustration and unnecessary searches on your credit file.

Timescales

Expect timescales for obtaining a mortgage offer to increase significantly. There is much extra work for the lenders to do, and more documentation for them to put on the file.

In particular the market in the next 2 to 3 months is likely to get very slow as all lenders are implementing new procedures or systems in some form with the inevitable glitches.

The common practice of a buyer looking to put in an offer on a property and then waiting several weeks to get their ‘ducks in a row’ for their mortgage lending will not work in the post MMR world.

You should engage an independent mortgage broker and give them sufficient time to fully establish your mortgage options and obtain a mortgage offer in principle for you before you start actively searching for property.

Further help

I’m sure my other independent mortgage broker colleagues on this forum will have much to add and that this site will continue to be a source of support and information.

I have a PDF document outlining the major changes in the MortgageMarket Review and if anyone would like to PM me I can arrange to provide them with a copy.

Good luck from midnight.

Bloomfield53

i

Would these rules affect me as an existing customer just switching to a new deal with my existing lender ? I have a mortgage with the Halifax. Fixed rate deal due to end in August. My outstanding mortgage is around 65% of my house value. I have never missed a payment in the 10 years I've had the mortgage, but I do have more unsecured loans than I used to. ( never missed a payment on anything) Will they start credit scoring and asking lifestyle things just to switch to a new fixed rate ? It seems it is safer to accept variable rate and pay more than apply to take a new fixed which seems very silly.

Leon_W

It shouldn't do Bloomfield53 but it might.


The FCA’s final mortgage market rules state: “... an affordability assessment is not required for an existing borrower, staying with their existing lender, if there is no increase in the current amount outstanding... unless there is a material impact on affordability. This is the case whether the transaction takes effect through a contract variation, or a new regulated mortgage contract.


That said, lenders seem to be over interpreting the rules. Halifax seem to be going over affordability just for a product transfer, which would scupper my own mortgage as I don't fit the criteria (interest only/wife part time/lower income). Needless to say I don't have affordability issues and not being able to take a cheaper deal over the SVR because of "affordability" is , quite frankly, ludicrous.

glossychops

Hi,

I have just been told by an estate agent that come tomorrow (26th April) an AIP is not valid unless it is tied to a specific property and that lenders should now provide Mortgage Certificates.

Is this correct - if so what is the use of an AIP in confirming to a seller/agent that you are able to make a sound offer for a property as you won't get one until you request one based on an actual property?

What is a Mortgage Certificate and how does it compare to an AIP?

Any further light that you can shed on this would be very helpful as I am a First Time Buyer new to this.

Leon_W

Just to add. We get a lot of posts here about porting mortgages. Lenders always treat these as completely new applications with wage slips and bank statements etc even when part of the mortgage is being redeemed and maybe downsizing. This can lead to big problems if income has fallen and you quite often find people trapped in properties because the lender will not port the mortgage, even for a lower amount.


Again, ludicrous.


If anyone would care to correct me, I can find nothing in the FCA rulebook that this should be the case. When porting a mortgage affordability checks need not be done. Lenders think otherwise however, maybe to trigger those lovely Early Repayment Charges perhaps !

cats_ahoy

Leon_W wrote: »

It shouldn't do Bloomfield53 but it might.


The FCA’s final mortgage market rules state: “... an affordability assessment is not required for an existing borrower, staying with their existing lender, if there is no increase in the current amount outstanding... unless there is a material impact on affordability. This is the case whether the transaction takes effect through a contract variation, or a new regulated mortgage contract.


That said, lenders seem to be over interpreting the rules. Halifax seem to be going over affordability just for a product transfer, which would scupper my own mortgage as I don't fit the criteria (interest only/wife part time/lower income). Needless to say I don't have affordability issues and not being able to take a cheaper deal over the SVR because of "affordability" is , quite frankly, ludicrous.

This is slightly worrying for me also as we have come to the end of our product, and I am currently unemployed while I finish my PhD (my partner works full time, I got a good stipend during my PhD), hoping to get a job soon and I have been interviewing for some, and now I am worried it may be three months after employment until we can switch deals or whatever minimum amount of time you need to be in a job for.

We can actually afford the repayments with just my partners wage, but I doubt they will take that into consideration.

Bloomfield53

If that is the case with Halifax. I'll just have to go onto the variable rate and pay more rather than risk the stress of problems ! Ludicrous I agree.

Alliersv

I have been a lurker here for a few weeks due to an ongoing mortgage faff which is stressing me out, and have found a lot of the threads and advice invaluable.
I joined today just to thank OP for this post, as this issue in particular is one I have been watching carefully.
Thankyou!

Leon_W

I'll have to join you Bloomfield. My fixed rate ends in February next year but hopefully by then Halifax will see the error of their ways ! Quite simply, affordability checks are not required as far as I can tell (I've read the FCA guides !)

Lou24

Is it harder in shared ownership?

ccbrowning

I'm worried Leeds is going to feel like they suddenly need to ask for even more information. Although they like four months of bank statements so should be able to figure out my outgoings easily enough. Valuation was yesterday but no formal mortgage offer yet.